When are pensioners required to submit a tax return?

Pensioners are required to submit a tax return if their total income exceeds the annual basic allowance. In 2024, the basic allowance is:

• 11.784 Euro for single persons
• 23.568 Euro for married couples

Taxable income:

• State pension (Anlage R)
• Private pensions
• Rental income (Anlage V)
• Capital income (Anlage KAP)
• Other income

Taxable portion of the pension:

Not the entire pension is taxable. The taxable portion depends on the year the pension started:

• For new pensioners in 2024: 83% of the pension is taxable.
• For pensioners who retired before 2005: 50% of the pension is taxable.

A personal pension allowance is set in the second year of retirement and remains unchanged for life. Pension increases from the third year of retirement are fully taxable.

Example:

Mr Mustermann, who retired in 2005, has an annual pension of 30.000 Euro. His tax-free allowance is 15.000 Euro. As long as his total income does not exceed the basic allowance, he does not have to submit a tax return. However, with a net annual income of 15.000 Euro, a single pensioner would exceed the basic allowance and be required to submit a tax return.

Tip: Pensioners should claim possible income-related expenses to reduce their tax burden. This includes, for example, the income-related expenses allowance of 102 Euro.

When are pensioners required to submit a tax return?

Which income is considered capital income?

With the introduction of the withholding tax, it is generally no longer necessary to submit the KAP form. However, in some cases you must still complete the KAP form:

• capital gains are not subject to tax deduction (e.g. sale of GmbH shares of less than 1 percent)
• income from foreign accumulating investment funds
• income (interest, dividends, etc.) from foreign accounts or deposits
• interest from loan agreements between private individuals
• interest on tax refunds
• surrender of endowment insurance policies (for contracts concluded from 2005)

Note: For certain income, you must also complete the KAP-INV form (for income from investment income not subject to domestic tax deduction) or KAP-BET form (for income from capital assets in the case of shareholdings, if the income and the tax to be credited have been determined uniformly and separately).

Furthermore, the KAP form must be completed in the case of an optional assessment if:

• a loss carryforward from previous years is to be taken into account or a loss offset of income from capital assets is to be made, or
• the saver’s allowance has not been fully utilised, or
• church tax has not been deducted despite church tax liability, or
• foreign taxes are still to be taken into account, or
• to check the amount of the capital gains tax deduction.

If you wish to apply for a so-called favourable tax rate check, you must also complete the KAP form. This may allow you to benefit from a lower tax rate with your individual tax rate if it is lower than the withholding tax rate of 25 percent.

Losses from worthless shares in the case of pure account write-offs may be offset against income from capital assets, but there is a limit on the amount. Losses can only be offset against income from capital assets up to a maximum of 20,000 Euro. Unused losses are then carried forward to subsequent years. Important: In the case of worthless shares, the bank does not carry out a loss offset. It does not include losses in the loss pot. Losses from worthless shares must therefore be included in the tax return.

Which income is considered capital income?

What information must employees provide?

Income: This section records the information that employees must enter in Form N. This applies to employees, workers, civil servants, and company pensioners. Please enter the data from your income tax statement here.

Expenditure: In the expenditure section, you can claim your work-related expenses. These include, for example, expenses for a home office, travel costs, and training costs.

For married couples, two separate sections for income and expenditure are automatically created.

What information must employees provide?

Am I required to submit a tax return as an employee?

If you are an employee earning income from employment (Form N), your employer deducts income tax, solidarity surcharge, and, if applicable, church tax from your gross salary each month. The taxes are paid directly to the tax office. In theory, everything is settled from a tax perspective, and you do not need to submit a tax return. This also applies to single employees (tax class I) who have not changed jobs during the year.

Mandatory assessment: You must submit a tax return

However, in many cases, the tax authorities suspect that the monthly tax deductions on income from employment have been too low. Many employees are therefore legally obliged to submit a tax return, known as the mandatory assessment.

Submission obligation legally regulated

For this reason, § 46 EStG regulates numerous cases in which employees are obliged to submit a tax return:

1. You have earned additional income of over 410 Euro during the year that was not subject to wage tax deduction. This includes, for example, fees, pensions, or rental income.
2. You have received wages from several employers simultaneously during a year.
3. You have had a tax allowance (e.g. for work-related expenses, special expenses, extraordinary burdens) entered on your income tax card. The allowances are to be reviewed again as part of the tax return. Exception: If it is a disability allowance, a bereavement allowance, or only the number of child allowances, you are not obliged to submit a tax return.
4. You and your spouse both receive wages and one of you was taxed under tax class V or VI or you both chose the factor procedure with the tax class combination IV/IV.
5. You have received wage replacement benefits (e.g. parental allowance, short-time work allowance, or unemployment benefit) during the year. These income replacement benefits are subject to the progression clause and can increase the personal tax rate on the remaining income.
6. You have received a severance payment or remuneration for work over several years from a former employer for which the favourable one-fifth rule was applied.
7. As divorced or separated parents, you have chosen a different allocation of the training allowance or the disability allowance for the child.
8. You have received special payments and changed employers in the same year, and your new employer did not take into account the values of the previous employer when calculating income tax.
9. Your marriage was divorced during the year or your partner died and one of the spouses remarries in the same year.
10. You have a spouse with limited tax liability who lives in the EU/EEA and is entered on your income tax card.
11. You have your residence or usual place of abode abroad and have applied for unlimited tax liability in Germany.

Note: From 1 January 2020, numerous mandatory assessment criteria also apply to employees with limited tax liability (§ 50 para. 2 sentence 2 no. 4c EStG, amended by the "Act on Further Tax Promotion of Electric Mobility and Amendment of Other Tax Regulations" of 12 December 2019).

Am I required to submit a tax return as an employee?

Is there an obligation for all non-employees to submit a tax return?

Even if you do not earn income from employment, you may still be required to submit a tax return under certain conditions.

Self-employed individuals, business owners, landlords, and pensioners must submit a tax return if their income exceeds the basic allowance. A tax return is mandatory for everyone if the total income (income minus income-related expenses and/or business expenses) exceeds the following amounts:

However, it may also be beneficial in other cases to submit a tax return as a self-employed individual, business owner, landlord, or pensioner. For example, if you wish to claim a loss carryforward, you must submit a tax return for the relevant assessment year.

Since the pension reform in 2005, more and more pensioners have to pay taxes and may need to submit a tax return.

Is there an obligation for all non-employees to submit a tax return?

Who needs to complete Form S for the self-employed?

A self-employed activity is typically carried out by freelancers. A freelancer is someone who works independently and is responsible for their own work, engaging in a specific professional activity or occupation listed in § 18 para. 1 of the Income Tax Act. Freelance professions require an activity that does not necessarily need to be preceded by a university degree. It only needs to be a form of scientific training. This includes self-study or knowledge acquired through professional experience. The knowledge must be equivalent to a university degree.

(1) Freelancers are, on the one hand, individuals who perform a specific activity (§ 18 para. 1 no. 1 of the Income Tax Act), namely a

• scientific, artistic, literary, teaching or educational activity.

(2) Freelancers are also individuals who practise a specific professional occupation explicitly mentioned in the Income Tax Act (§ 18 para. 1 no. 1 of the Income Tax Act):

• Medical professions: doctors, dentists, alternative practitioners, dental practitioners, physiotherapists.
• Legal and business consulting professions: lawyers, notaries, patent attorneys, auditors, tax consultants, business economists, certified accountants, tax agents.
• Technical and scientific professions: surveyors, engineers, architects, commercial chemists, pilots.
• Media professions: journalists, photojournalists, interpreters, translators.

(3) Freelancers can also be individuals who practise a similar profession comparable to the listed professional occupations in terms of activity and training. The list of freelance professions in § 18 para. 1 no. 1 of the Income Tax Act is not exhaustive. It is important that the activity is carried out in a leading and independent manner based on personal expertise. This applies, for example, to the following professions:

• Geriatric nurses, dieticians, occupational therapists, podiatrists, speech therapists, orthoptists, medical pedicurists, state-certified masseurs and therapeutic masseurs, medical bath attendants, paramedics, dental practitioners, midwives, psychological psychotherapists, child and adolescent psychotherapists, IT consultants, business consultants.
• Software engineering, work as a network or software administrator and supervisor (Federal Fiscal Court rulings of 22.9.2009, VIII R 31/07, VIII R 63/06, VIII R 79/06).

(4) Activities that cannot be classified as freelance work and do not constitute a business operation fall under other self-employed activities. A characteristic here is also personal work performance. However, other self-employed activities are usually carried out occasionally and only exceptionally on a sustainable basis (§ 18 para. 1 no. 3 of the Income Tax Act):

• Executors, asset managers, supervisory boards, property managers, insolvency administrators, trustees, carers, estate administrators, arbitrators, interviewers for state statistical offices, childminders, legal guardians, etc.

The distinction between business operations and self-employed activity is often difficult, as freelance work usually also involves the intention to earn income. Many activities therefore fall under both the characteristics of freelance work and those of a business. In these cases, the decisive criterion is the intellectual, creative work that is the focus of freelance work.

Who needs to complete Form S for the self-employed?